Lead Outlook

Battery Demand

Battery Council International (BCI) data showed that North American battery
shipments registered YoY gains in the month of July as original equipment
automotive battery and replacement battery demand remained steady in
following months.

The original equipment automotive batteries shipments increased percent 23.41
YoY 928,331 units in July while replacement battery shipments rose by percent
1.14 YoY to 8,554,935 units.
2008 2009 2010 10 2008 2009 2010

2 9

1 6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
OEM Battery Shipm ents (Mln Units) Replacem ent Battery Shipm ents (Mln units)

The battery demand has improved in 2010 as firm original and replacement
battery demand from automobile sector in first half of the year helped
consumption to reach the pre recession levels; however if we compare the
growth with 2007 and 2008 levels the battery demand has not grown as expected
by lead producers who increased their capacities to make more money by
addressing the increased metal demand.

Global Stocks

Looking at the global Cancelled Warrants as a percentage of Total Stocks

refined lead stocks, the 194 LME Lead Stocks (Kt) 9.0
LME warehouse inventory 192 8.0
is hovering near eight year 190 7.0
high level of 190 Kt. The 188 6.0
continuously swelling 186 5.0
stocks has added to lead 184 4.0
producers’ woes and kept 182 3.0

metal prices constantly 180 2.0

178 1.0
under pressure.
176 0.0

WBMS has also reported
Jul-10 Jul-10 Aug-10 Sep-10
that global refined lead
production increased by 3 percent YoY to 5.172 million tonnes in first seven
months of the year while refined consumption increased by 1.6 percent YoY to
5.101 million tonnes thus resulting in a surplus of 71.5 Kt in subsequent period.
Seasonality

The analysis of historical price data shows that lead prices tend to move in
upward direction at the onset of winter season as lead demand improves to fulfill
replacement battery demand. 1.09
Lead Price Seasonality

People generally change 1.07
their automotive batteries in
1.05
winter season as lead acid
batteries are more vulnerable 1.03
to failure in cold weather. 1.01
The vehicles that were sold 0.99
more than 2 years back 0.97
require new batteries in this 0.95
current quarter and 0.93
replacement battery demand 1 2 3 4 5 6 7 8 9 10 11 12
shall increase to fulfill that
requirement.

Conclusion

The lead demand is directly related to automobile sector growth as about 70

percent of lead is consumed in form of SLI batteries. The automobile sector
growth is expected to ease in remaining part of the year as economic slowdown
coupled with persistently high unemployment rate at western economies shall
result in restrained consumer spending.

The current surge in prices is supported by seasonal lead demand from battery
manufacturers and cross commodity sentiments. LME cancelled warrants, an
indicator of outgoing warehouse metal have again started rising since start of
September and currently stand at around 8 percent level thus conforming the
seasonal trend of high battery demand in winter season.

The current macroeconomic data is pointing towards a lackluster economic recovery in

second half of the year. While the possibility of double dip recovery has been reduced
but the global economy has not been able to maintain the first half growth rate. The lead
prices are supported by near term seasonal demand but expectation of slowdown in
battery demand will subsequently reduce the lead demand in upcoming months and
along with increased metal production and rising inventory it will drag down the prices to
lower levels in medium term.